#11: Managing implemetation risk

Now that you know how to put a strategic plan together, it is time to look at how you can use your knowledge to build your business further.

When I used to work in Venture Capital we were regularly assessing strategic and business plans. If we liked the people, and the idea, we would move on to more detailed due diligence about every aspect of the business. Only then would you get in to negotiation of terms and conditions, which would lead to an investment being agreed. The whole process would regularly take over 6 months. To give you an idea, over one 12-month period we looked at 700 plans, and invested in 15 of them, so around 2%, which is in line with the industry norm.

On the day the final decision is being made about whether to invest or not, about 60% of the weight of the decision is around implementation risk. All the reasons not to do the deal had been removed by the due diligence process. However, it didn’t matter how perfectly crafted the business plan was, and how sound the underlying idea was, the focus was really on did we believe that the management team could execute the plan.

A wise old American venture capitalist once said:

“I would rather have the A Team with the B Plan than the other way round”!

Managing Implementation Risk is therefore of the utmost importance. A good starting point is around staff engagement. Ask yourself the following five questions:

1. Can you inspire and motivate your people with your vision for the future direction of the business?
2. Can you explain to them with absolute clarity what the process is going to be for the vision to be realised?
3. Can you get them to take ownership of the challenges, so that they set the outcomes and transition from being focused on “busyness” to being focused on achievement?
4. Can you lead the way by demonstrating an attitude that embraces change where it makes sense to do so i.e. not change for change’s sake? In this context it is important to note that if you are trying to change something you have to stick at it for a protracted period of time until your brain accepts it as the “new norm”.
5. Can you create a culture of trust and integrity, so that information sharing is encouraged and people collaborate better by following key common processes?

If this resonates with you I encourage you to read the work of Michael Gerber and Mark Fritz, who have so many helpful suggestions for you to make this work.

A few tips to help you with this:

1. You need a clear and robust plan, a strong purpose, and to be surrounded by the right people.
2. You need to encourage communication.
3. Look for some easy and early “quick wins”, which will help you build momentum.
4. Be aware of the team supporting you, and check regularly where they are in the Forming/Storming/Norming/Performing sequence, bearing in mind they can go backwards as well as forwards, particularly when there are changes to the composition of the team.
5. Focus on growing your best people (in terms of both attitude and achievement); they will help you deal with the rest of your people.
6. Ask your team questions, and get them to give you options, which will increase the possibility they come up with an option you can support
7. Keep everyone aligned in terms of what success is going to look like.
8. Stick to your values – know what you will/won’t tolerate and refuse to compromise.
9. Be open to feedback and act on it.
10. Review progress regularly and don’t be afraid to take swift corrective action if necessary.

A final thought for you on this topic. I remember back in the mists of time an annual appraisal where one of the comments was “He gets things done because of his people, rather than at the expense of his people”. That made me very happy.

Next month, we will look at how your business knowledge can be used to build a successful and growing business.

#10: The strategic planning process

Following on my from my last article on business growth, I would now like to talk about how you can achieve this through implementing a strategic plan for your business.

A Strategic Plan is fundamental to your ambitions being realised. In simple terms, you really need to be able to assess where you are with the business, identify where you would like to take it to achieve your goals, and then devise a plan that will enable you to get there.

If this is a topic which really interests you, I suggest you read The Strategic Planning Workbook by Neville Lake, which will really give you a comprehensive framework for devising a strategy and implementing it. We haven’t the time or space to do that, so will take a more “minimalist approach”.

I was fortunate enough to do some work in 2008 with Dr. John Marti of Southampton University, and I loved his no-nonsense approach to this topic. I will summarise some of his key thoughts and recommendations below.

Firstly, I remember he made some very helpful overarching remarks:

1. Strategy needs to be simple, crafted in everyday unambiguous language.

2. It needs to be communicated to and understood by everyone.

3. Keep it brief – ideally on one-page (I love one-page plans!).

4. It needs to be internally consistent, and use a common language.

5. It needs to be capable of being implemented.

He then moved on to present a very useful framework for the creation of an effective strategy:

1. Starting with context is a pre-requisite to crafting a plan. So questions for consideration might include:

• What are the owner’s values, philosophies and beliefs?
• What do the senior team want to achieve?
• What is the purpose of the business?
• What is the vision?
• What business is the company in?
• What business should it be in?

2. You would now have a platform which would permit a strategy to be developed. So the next set of questions might include:

• What is the business objective? This is the “what”.
  John recommended restricting yourself to one objective which would maximise focus and concentrate effort, committing it to paper and limiting yourself to the fewest number of words possible, starting with “To”. For example, “To be the provider of choice in Sussex of social media training for business start-ups”.

• What is the business strategy? This is the “how”.
  This would be an equally short statement starting with “By”. For example “ By creating a network of evangelical start-ups who direct other business to us”.
• What is the competitive position?
• What are the sustainable competitive advantages?
• What are the organisation’s capabilities?

3.  You would then conclude with assessing how to create an implementation plan:

• What are the tactical plans?
• How will they be implemented?
• What resources are needed?
• What changes will be required?
• What is the timescale?
• Who will be responsible and accountable?

Obviously, as you work through this you may have to undertake some information gathering, in order to ensure that your analysis and resultant decisions are done on a fully informed basis.

#9: Prerequisites for sustainable profitable growth

No matter what business you are in, it is important not to underestimate the work that needs to be done if the founder of that business is considering a push for sustainable, profitable growth. I am indebted to my good friends Paul Chapman and Mike Robson of Azure Partners, who have summed this up very well in their article “Creating value in your lifestyle company”:

“All business owners want to be successful, but their interpretation of success varies widely. For many, success is defined as providing the shareholders with a good salary and reasonable financial security. Some business owners are more ambitious. They want to create real value in their businesses. Perhaps they see a clear competitive advantage that can be exploited in their current market or a new one. Perhaps they have a new product, technology or service to roll out. Developing a valuable company from a lifestyle business is an admirable goal, but the reality can be tough. Making the change successfully requires most, if not all, of the following:

• A real market need and a clear understanding of that need
• A robust vision of how you can fill that need and the capability to realise the vision yourself rather than creating opportunities for competitors
• The right people at board, management and operations level and the structure that gives them the time to focus on the chosen growth path in addition to routine activities
• A scalable marketing and sales function that really does know how to beat effective competition
• A scalable delivery capability that can grow in size whilst maintaining service and quality levels
• Effective and timely financial and operational reporting systems and processes
• Experience of a wide range of marketing techniques and routes to market, either directly or through alliance partners
• The right funding at the right time to grow the business, organically or through acquisition
• Accessing experienced and relevant external help at the appropriate times

And by no means least: The commitment and drive of the business owners to succeed.”

At this point, it is worth mentioning 3 financial aspects which can often make (or break!) a business:

• Understanding breakeven
• Understanding the importance of margins
• Understanding the difference between cash and profit

It will therefore be worth devoting some time to assessing your readiness for growth. Your aim, as Michael Gerber expresses in the E-Myth Revisited, is “to build a business that works predictably, effortlessly, and profitably each and every day”. He adds that the business needs to work without you! You will know you have achieved this when you are genuinely working “on” the business, as opposed to “in” the business.

#8: Learning to let go

The founder/owner of a business will eventually need to let go of things and feel okay about it. When you think about change, you can be forgiven for assuming that it’s the province of the big companies. But nowhere is the impact of change felt more acutely than in the small business.

In this article we will explore two situations when letting go is important – adding staff and grooming the business for sale. Naturally, it will be difficult to ever be anything other than a lifestyle business if you cannot come to terms with this, but there are mentors out there who can help you through this process.

More staff

If you are looking to take the first step of adding a second director/partner, or hiring your first employee, you may want to consider some of the following questions to help you feel more comfortable with the process:

1. What do I really enjoy doing and what am I good at? You may want to consider undertaking some behaviour profiling to help with this. PRISM is a user-friendly tool to do this.
2. What aspects of the business could I safely and reasonably delegate or pass to someone else?
3. What aspects of this business are unseen by the client, so I could pass associated tasks to someone else whilst maintaining the client relationship?
4. What tasks are there that can be clearly defined, are linked to a timeline of some sort, are genuinely achievable and where outcomes can be measured

Selling the business

If your ultimate intention is to sell the business, then the sooner you can come to terms with letting go the better. My good friend Mike Robson at Azure Partners puts this very well when he talks about “Minimising the reliance on owners when selling”:

“Many of the business owners we work with have launched and developed their companies from an early stage and have built out their businesses around their individual skill sets, experience, preferences and personalities.

This is absolutely fine for a business in the early stages of development and growth, but it often means that vital parts of the business are run by people who are not specialists in their areas, which will ultimately restrict the organisation’s ability to succeed in the longer term. This weakness is often compounded by the fact that many companies lack a full set of Board and Management level business skills.

All these issues will be brought into sharp focus when you try to sell your business. So if you want to achieve a clean exit, there’s a lot of work to be done in advance of even starting an exit conversation.”

Letting go

Letting go means allocating tasks thoughtfully. Good task allocation will win you precious time, grow and motivate your colleagues, and potentially identify a successor. Poor task allocation will leave you and your staff demoralised and drained – oh and the job probably doesn’t get done either.

Changing your role is not necessarily easy. To make it work you need to change something you do and have the discipline to keep repeating this behaviour until it becomes a habit or a “new norm”.

One of the key leadership skills you will require as the business grows will be communication. Having the ability to craft a robust plan will only get you so far if you cannot inspire people to achieve outstanding results, and you want the focus on outcomes not activities. Command and control has largely died out as a leadership mechanism, so people have to “buy in” to being led, and if you can win them over and get them engaged it can make the difference between the business surviving and prospering.

The habits of good leaders are many and varied, but my favourites are:

• Communicate their vision, and inspire and motivate others
• Understand their markets
• Ask the simple question
• Take difficult decisions
• Learn from previous experience, adapt and apply solutions to current situations
• Behave in an authentic way
• Set the tone from the top, particularly in terms of business ethics

If you are interested in this aspect of growing your business, take a look at Leading at the Speed of Light by Caitlin and Matthews. I think you will find it inspiring.

For help with letting go, contact me.